Correlation Between FTI Consulting and Red Violet

Can any of the company-specific risk be diversified away by investing in both FTI Consulting and Red Violet at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FTI Consulting and Red Violet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FTI Consulting and Red Violet, you can compare the effects of market volatilities on FTI Consulting and Red Violet and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FTI Consulting with a short position of Red Violet. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTI Consulting and Red Violet.

Diversification Opportunities for FTI Consulting and Red Violet

-0.67

Correlation Coefficient

FTI Consulting  Red Violet

Excellent diversification

The 3 months correlation between FTI and Red is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding FTI Consulting and Red Violet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Violet and FTI Consulting is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FTI Consulting are associated (or correlated) with Red Violet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Violet has no effect on the direction of FTI Consulting i.e., FTI Consulting and Red Violet go up and down completely randomly.

Pair Corralation between FTI Consulting and Red Violet

Considering the 90-day investment horizon FTI Consulting is expected to under-perform the Red Violet. But the stock apears to be less risky and, when comparing its historical volatility, FTI Consulting is 1.39 times less risky than Red Violet. The stock trades about -0.11 of its potential returns per unit of risk. The Red Violet is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,845  in Red Violet on August 31, 2024 and sell it today you would earn a total of  804.00  from holding Red Violet or generate 28.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FTI Consulting  vs.  Red Violet

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Red Violet

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Red Violet are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Red Violet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FTI Consulting and Red Violet

The main advantage of trading using opposite FTI Consulting and Red Violet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTI Consulting position performs unexpectedly, Red Violet can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Red Violet will offset losses from the drop in Red Violet's long position.

The idea behind FTI Consulting and Red Violet pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.